After several rounds of discussion, the government has finally decided the spectrum base price for the upcoming 2G auction, say news reports.
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The reserve price for 5 MHZ of spectrum has been set at Rs 140 billion. As per reports, this pegs every MHz of spectrum in the 1800 MHZ band at a minimum of Rs 28 billion.
The government has also decided to keep the reserve price for 800 MHz spectrum used by CDMA operators at 1.3 times that of the 1800 MHz band. This implies that the reserve price for 5 Mhz CDMA spectrum will cost Rs 182 billion for companies like Sistema Shyam TeleServices Limited.
Also, the government has also decided, based on the Telecom Regulatory Authority of India (TRAI?s) recommendations that operators will have to share 3-8 per cent of their annual revenues as spectrum usage charge. The refulator had recommended that this levy be fixed at 1 per cent, while the Department of Telecommunications wanted it to be fixed at 3 per cent.
Industry speak
The reserve price determined by the government has met with a negative reaction by various industry bodies.
Cellular Operators Association of India
?COAI has expressed its disappointment at the spectrum pricing decision stating that it affords no real relief to the problem of tariff and affordability, industry health or national development. COAI further stated that the cabinet decision on the reserve price for auction of 1800 MHz spectrum being set at Rs 140 billion for 5 MHz, does not present a viable business case for the industry and will gravely impact its sustainability and future expansion plans.?
?This reserve price is unreasonable and still very high and will adversely impact the business viability of the operators and pose a formidable impediment towards raising funds from banks for expansion of services, adding to the already existing funding woes of the sector. Moreover, it will lead to increased tariffs, thereby hurting the government?s ambitious targets of affordability rural penetration.?
FICCI
?An unreasonably high base price has been fixed by the union cabinet for the auction of 2G spectrum. Further, spectrum usage charges have also been kept very high, between 3 and 8 per cent. This will not only impact the overall health of the telecom industry, which is already reeling under severe financial stress, but also goes against the overall vision of the government to provide affordable telecom services to the masses.?
?FICCI believes the move is anti-consumer and harms competition. It will force telecom companies to increase tariffs and substantially increase entrance barriers for new players, thus adversely impacting any new investments in the sector.?
